Opinions Please - Lincoln Park, Chicago

[Ed S.]

Greetings BP,

Long time lurker, first time poster. I've been renting in Chicago for 3 years, and I am ready to make the move into a home purchase.

Objectives:

• Buy multiunit building and hold for ~10 years
• Stay near lakeshore in Lincoln Park
• Keep personal costs near current rental ($2000/m)

Could you give me a quick opinion on numbers, please?

Income: $145k

Current Downpayment: $60k

Target home price: $600k

I've found this two-flat that fits my target.  The neighboring single story (with curb appeal) just sold for $800k.  Mine definitely needs some cosmetic work, but appears that the big tasks (plumbing/electric/hvac) have already been completed.

https://www.redfin.com/IL/Chicago/223-W-Menomonee-St-60614/home/13345194

Monthly balance

Mortgage payment: $3000

Taxes/Insurance: $1000

Rental income from 2nd unit: $2000

Do my numbers sound sensible? Would you recommend any other property types?  I am personally attached to the Lincoln Park neighborhood.  Should I keep renting here and buy a specific investment property in a cheaper neighborhood?  

Totally open to your feedback.  Thanks for all of the great resources on here!

Ed

[Brie Schmidt]

Originally posted by @Ed S.:

Greetings BP,

Long time lurker, first time poster. I've been renting in Chicago for 3 years, and I am ready to make the move into a home purchase.

Objectives:

• Buy multiunit building and hold for ~10 years
• Stay near lakeshore in Lincoln Park
• Keep personal costs near current rental ($2000/m)

Could you give me a quick opinion on numbers, please?

Income: $145k

Current Downpayment: $60k

Target home price: $600k

I've found this two-flat that fits my target.  The neighboring single story (with curb appeal) just sold for $800k.  Mine definitely needs some cosmetic work, but appears that the big tasks (plumbing/electric/hvac) have already been completed.

https://www.redfin.com/IL/Chicago/223-W-Menomonee-...

Monthly balance

Mortgage payment: $3000

Taxes/Insurance: $1000

Rental income from 2nd unit: $2000

Do my numbers sound sensible? Would you recommend any other property types?  I am personally attached to the Lincoln Park neighborhood.  Should I keep renting here and buy a specific investment property in a cheaper neighborhood?  

Totally open to your feedback.  Thanks for all of the great resources on here!

Ed

Your numbers are off a bit, if the purchase price is $600k you can put 3.5% down with FHA or 20% down with conventional (the 10% down conventional is only available on single units, not 2-4 units). In this scenario you would have to go conventional since the loan amount is above he FHA loan limit for a 2 unit ($456k)

So after 20% down ($120k) you would finance $480k - Your monthly P&I payment would be $2400 ($500 for every $100k financed with conventional, $575 per $100k financed for FHA)

2014 taxes were $7800 when the property was assessed at $456k but the whole city got reassessed this year and the new valuation is $659k so your taxes will be $11,309 based on the current rate (it is increasing next year, we don't know for sure but rumor is it is 12% so assume $12,666) so $1055 a month

Insurance - assume about $200/mo

Monthly PITI = $3,655

In the current condition I think $2000 a month is accurate.

So with $4000 gross rental income less 3% vacancy, 3% capex, 2% water, 5% repair your looking at $3480 a month. According to the MLS the gas bill is $117/mo so that brings it to $3,363. with a mortgage payment of $3,655 it will cost you about $300 to have the property if you didn't live there.

Being an agent who only works with investors, I can tell you 2 units never cash flow, and lincoln park will never cash flow.  You are going to have to move way west (Lakeview, Roscoe Village, most of Lincoln Square, Bucktown, Wicker park, all won't cash flow)